August 24, 2012
The State’s largest retirement system postponed until September a decision on whether to reduce the system’s assumed rate of return on investment — a decision that could result in an increase in the annual State contribution required by law.
As discussed here, on August 23, 2012 the Board of Trustees of the Teachers’ Retirement System (TRS) considered a consultant’s recommendation to lower the assumed annual investment rate of return from 8.5% to either 8.25%, 8% or 7.75%. According to a news release, the consultant said that the lower rates take into account projections about realistic investment earnings in the future as well as inflation and other economic factors.
The reduced rate of return, along with other changes in actuarial assumptions recommended in the five-year review, would increase the State’s required FY2014 contributions to TRS from a current projection of $3.5 billion to as much as $4.1 billion. The system’s funded status (share of accrued liability covered by assets) would have declined to as low as 41.1% at the end of FY2011 from 46.5%.
A decision on the recommendations was delayed partly because of vacancies on the 13-member Board of Trustees, according to the news release. The Board consists of the State Superintendent of Education, six trustees appointed by the Governor, four trustees elected by TRS members and two trustees elected by annuitants. Two of the Governor’s appointed positions are vacant.